Does inequality cause inefficiency?

An economist from Santa Fe, New Mexico, is questioning the neoliberal economic assumption that economic inequality is the flipside of efficiency. Professor Samuel Bowles, who became interested in the question of inequality at the time of Martin Luther King, claims that economic inequality causes inefficiency, by locking up productive labour as "guard labour", required to protect the wealth of the haves and keep the have-nots compliant and productive:

In a 2007 paper on the subject, he and co-author Arjun Jayadev, an assistant professor at the University of Massachusetts, make an astonishing claim: Roughly 1 in 4 Americans is employed to keep fellow citizens in line and protect private wealth from would-be Robin Hoods.

The job descriptions of guard labor range from “imposing work discipline”—think of the corporate IT spies who keep desk jockeys from slacking off online—to enforcing laws, like the officers in the Santa Fe Police Department paddy wagon parked outside of Walmart.

The greater the inequalities in a society, the more guard labor it requires, Bowles finds. This holds true among US states, with relatively unequal states like New Mexico employing a greater share of guard labor than relatively egalitarian states like Wisconsin.

While some guard labour will exist even in the most egalitarian of societies, too much guard labour sustains "illegitimate inequalities", and unproductively locks up units of labour which could, in a more equal society, be employed more productively. And an excess of guard labour also continues inequality, by allowing the creation of a "working poor" compelled by economic necessity to accept unfavourable working conditions, a segment of the workforce it is difficult to elevate oneself (or one's children) out of.